Crane Co. Reports Flat Q4 Payment And Merchandising Technologies Sales, Raises 2018 Guidance

Posted On: 1/30/2018

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STAMFORD, CT -- Crane Co. has reported its 2017 full-year results and issued revised guidance for 2018. The company recently completed its $800 million acquisition of Crane Currency, a leader in the global banknote supply and security industry, and the effects of the transaction -- the second-largest in company history -- are included in the 2017 report and 2018 guidance.

"We delivered three new records in 2017: adjusted earnings per share of $4.53, adjusted operating margins of 15.2%, and free cash flow of $269 million," said Crane Co. president and chief executive Max Mitchell.

Crane Co.'s Payment and Merchandising Technologies segment had 2017 fourth quarter sales of $194 million, relatively flat with $195 million during the same 2016 period. Operating margin declined to 13.1%, from 19.7% last year, reflecting the impact of repositioning charges. Excluding special items, operating margin of 19.4% declined slightly from 19.7% last year.

Payment & Merchandising Technologies

Fourth Quarter Change
(dollars in millions) 2017   2016      
Sales $     194 $     195 $     %
Operating Profit $ 25 $ 38 $ (13 ) (34 %)
Operating Profit, before Special Items* $ 38 $ 38 $ (1 ) (2 %)
Profit Margin 13.1 % 19.7 %
Profit Margin, before Special Items* 19.4 % 19.7 %
*Please see the attached Non-GAAP Financial Measures tables

Companywide, Crane Co.'s fourth quarter 2017 sales were $714 million, up 5% over the same period in 2016. Core sales increased $13 million, or 2%, with $14 million, or 2%, of favorable foreign exchange, and a $5 million, or 1%, net acquisition benefit.

Fourth quarter 2017 operating profit was $91 million, compared with an operating loss of $92 million in 2016. Excluding special items, fourth quarter 2017 operating profit was $109 million, an increase of 8% compared versus 2016.

Companywide full-year 2017 sales were $2.8 billion, up 1% over 2016. Core sales increased $31 million, or 1%, and net acquisitions contributed $14 million, partially offset by $7 million of unfavorable foreign exchange.

Crane Co.'s full year-2017 operating profit was $402 million compared with $200 million in 2016. Excluding special items, full-year 2017 operating profit was $423 million, an increase of 6% over $398 million in 2016.

Mitchell said the company views the recently enacted Tax Cuts and Jobs Act (TCJA) as a favorable development with an annual EPS benefit of approximately 50¢. "The TCJA should also improve our global competitiveness by enabling increased flexibility to deploy capital in the United States," he said. In view of the benefits and related flexibility anticipated from the new tax law, the company has decided to accelerate investments across several of its businesses over the next two years.

Full-year 2017 GAAP earnings per share was $2.84, compared with $2.07 in 2016. Full-year 2017 results include a tax charge of $87 million ($1.44 per share) related to the new tax law; an after-tax charge of $8 million (13¢ per share) related to repositioning, net; and, an after-tax charge of $7 million (11¢ per share) for M&A-related items.

The company now expects 2018 full-year GAAP earnings per share of $4.65 to $4.85. Full-year EPS for 2018, excluding special items, now is expected to be $5.35 to $5.55. Guidance assumes core sales growth of 2% to 4%, a modest benefit from favorable foreign exchange, and some $400 million of sales contribution from the Crane Currency acquisition.

Full-year 2018 free cash flow (cash provided by operating activities less capital spending) is expected to be in a range of $220 to $250 million, including capital expenditures of approximately $125 million. Capital expenditures are expected to increase in 2018 primarily due to repositioning activities, further investments enabled by the TCJA, and investment activity at Crane Currency.

"The growth potential of our core business, combined with the benefits from the Crane Currency acquisition, tax reform, accelerated growth investments, and repositioning activities, will position Crane for double-digit annual adjusted earnings growth for at least the next several years, with further upside possible from additional capital deployment," Mitchell concluded. "We also announced today that we are raising our dividend for the first time since 2014, further reflecting confidence in our outlook."

Crane Co. is active in aerospace and electronics, engineered materials and payment and merchandising technologies. It is the parent company of Crane Merchandising Systems, a leading manufacturer of vending machines, and Crane Payment Innovations.